Property jargon explained

Additional Security Fee

An up-front, one-off fee paid to the lender to protect them against the borrower defaulting on the loan. Usually charged on mortgages over 75% of the house value. Also known as MIG, Indemnity Guarantee Premium and Mortgage Indemnity Premium.

Advance

The amount of money that your lender agrees to lend you.

Adverse Credit

Just as it sounds, it is a term used to refer to people with a poor credit history. This may include but is not limited to, things such as county court judgments (CCJ’s), bankruptcy, mortgage arrears, Individual Voluntary Agreements (IVA’s) and credit card or other borrowing arrears or defaults. (Can also be referred to as Non-Conforming).

Agent

This is normally a person/company, organisation that has been appointed and who acts on behalf of a landlord, such as a letting agent, management agent or estate agent.

Agricultural Covenant

This is a very specific planning condition that allows the building of a residential dwelling on the condition that it is occupied by a person employed or associated with working the land in someway.

Applicant

This is how you are normally referred to by an estate agent/auctioneer when you are the potential buyer of a property.

Appraisal

This is what is done, usually by an estate agent, when you are selling your property to determine what they think the correct current value of it is. They will come in and appraise your property.

APR

Annual Percentage Rate. The amount of interest you will pay on your loan.

Arrangement Fee

Sometimes you might need to pay this fee to lenders for arranging a loan for you.

Assignable Contract

This is when an exchange contract allows you to sell on a property before the completion date.

Assignment

This is when the ownership of a property is transferred from one person to another.

AST

AST stands for “Assured Shorthold Tenancy” if basically gives a landlord the right to reclaim their property back after a specified period of time. At the moment AST’s tend to be for about 6 months.

Auction

Bailiff

Official who repossess your possessions or house if you cannot keep up on your mortgage/loan repayments.

Bank Automated Clearing System (BACS)

A type of funds transfer that is normally electronically done it is normally free of charge.

Bankers Draft

Different to a cheque in that the money has already been debit straight from your account, therefore the person receiving the bankers draft is confident the money will come to them, whereas with a cheque there is no guarantee there will be any money until it has been cleared. There is normally an administration fee to obtain a bankers draft, as well as you having to give a notice period, normally of at least 24 hours.

Banks

A place to go for Mortgages & Loans.

Base Rate

This rate is set by the Bank of England and is used as a benchmark for lenders to set interest rates by. It represents the lowest rate of interest a bank will charge you when it lends you money. This rate is reviewed periodically thorough out the year and can go up as well as down.

Beneficial Owner

This is the person owning land and who is therefore entitled to it for his/her own benefit. This is different from say a trust etc that may hold land for the benefit of someone else.

Block Management

This refers to the agents that manage/act on behalf of the freeholds and leaseholds, normally for a block of flats or apartments. The will usually arrange things like, the insurance, tending the garden, general cleaning and re-decoration.

Booking Fee

Another term meaning arrangement fee.

Break Clause/Release Clause

These are sometimes used in conjunction with fixed term tenancies. For example: in an AST after the first 6 months is over when it comes to renewal, either party (landlord or tenant), will often request that a break/release clause be entered into the agreement, if they are unsure whether they will want to continue renting the property for the duration of the next 6 months. This clause will normally allow either party to get out (normally with about 2 months notice) before the end of the new term.

Bridging Loan

An expensive temporary loan to tide you over when having to buy your new house before selling your old home.

Broker

This is a person that advises on mortgages etc. Known as a mortgage broker.

Building Insurance

This is a type of insurance that is required to cover against the structure of your property being damaged or destroyed. The sum that is insured covers the estimated cost of rebuilding the property. (keep in mind this can vary greatly from the market value of the property.)

Building Society

Another place to go for Mortgages & Loans

Buy to let (BTL)

This is a specific mortgage that allows you to buy a property with the main aim being to find tenants and let it out. The income from renting the property out is taken into consideration by the lender.

Capital

The total amount – sometime referring to sum borrowed in a mortgage – sometimes the amount you have left in a property after the mortgage has been repaid.

Capital and Interest Mortgages

With a capital and interest mortgage the monthly mortgage payments pay off both the initial loan (i.e. cost of the property) and any interest that has been charged. Therefore at the end of the loan term, the entire debt will be repaid with nothing outstanding. (also know as a repayment mortgage).

Capital Rest Period

This is to do with the regularity with which the Lender calculates the outstanding balance on any give mortgage and hence the size of the monthly repayments. This figure is normally calculated annually, monthly or daily.

Capped Rate

This is a rate of interest that you agree to with your lender that will be the maximum you will pay during a set period of time. This is period of time is often the first 1-3 years of the mortgage starting, but it can be for longer. The interest rate cannot go any higher than this capped rate during this specified period of time.

Cash Back Mortgage

See Cash Back on completion.

Cash Back on completion

This is where you get a lump of cash from the mortgage lender on the completion of a sale.

Cash on Cash Return

This is the same as Return on investment.

Caution

These are entries that are on a land register to protect the interest of a third part.

Chain

This occurs when the seller needs the sale of their house to occur before they can complete the purchase of another property. The same situation may exist for others in the chain. As a result, the whole chain can collapse if one link breaks.

Chain Free

This is simply when a potential buyer does not need to sell a property in order to buy a new one hence they are “chain free”. First time buyers are often chain free.

Charge

The term attached to a property by the lender to give security against the asset. It means that they have a right to the property value should it come to a sale.

Charge Certificate

This is a certificate issued to the lender by the Land Registry that gives evidence of the lender’s charge over the property.

Chief Rent

This is a payment made on freehold land to the original freeholder forever. This differs from ground rent because ground rent normally has a limited period.

Collateral

The property is what is classed as collateral. It is seen as a guarantee that you will be able to pay the lender the loan. If you aren’t able to repay this loan the property could be sold by the lender in order to recoup the money they originally lent you.

Company Let

This is when you have let your property to a specific bona fide company.

Completion

This is the final stage of the buying process. The ownership is legally transferred from the seller to the buyer.

Compulsory purchase order

(CPO'S) are normally issued by local authorities and they enable an authority to purchase a property whether the seller wishes to sell or not.

Contents Insurance

Insurance to cover any loss or damage to your possessions.

Contract Race

This is what sometimes happens when two potential buyers want to buy the same property. The seller will normally be the one to instigate the contract race but it can also be instigated by a buyer. The winner of the race will be the first buyer to be in a position to exchange contracts.

Contracts

The legal documents needed to transfer the ownership of property they are signed by both the seller and the purchaser.

Conversion

This is a flexible term in property and can mean such things as a house that has been converted into flats or a loft converted into a bedroom, as well as other things.

Conveyancing

Legal work involved in buying and selling a house.

County Court Judgement (CCJ)

You can get a CCJ if you default on a payment of debt. If you do get a judgment against you may have difficulty in getting credit in the future.

Covenants

The covenants are the terms of any given tenancy agreement. They include any obligations or promises made by either the Landlord or the tenant. They are requirements by law on the owner of a property that they will either do or not do something with their property.

Credit Search References

These are references taken regarding a potential tenant. These references can be from sources such as the tenant’s employer. A check of the tenant’s credit history is also often carried out.

Current Account Mortgage

This type of mortgage is a flexible mortgage that can keep all your finances in one place. It combines your mortgage with a current account and the money in the current account can be automatically set against the mortgage balance and then interest only charged on the outstanding amount of the loan. In practice this should mean that interest payments should be reduced.

Deeds

These are the legal documents associated with a property.

Default

This is when you have failed to make payments as you have agreed to. In property terms this is normally used when talking about missed payments on your mortgage.

Delayed Completion

Completion is classed as delayed if they take over 28 days to complete after exchange of contracts a delayed completion needs to be agreed before exchange of contracts.

Deposit

This is normally a lump sum paid to the seller towards the overall cost of the property it is normally held by solicitors until completion of contracts.

Direct Debits

Direct debits are used to make payment directly from a bank account. Direct debits are used usually used when the amount being paid might vary otherwise Standing Orders are used.

Direct Lenders

A new form of mortgage lender who deals solely over the telephone.

Disbursements

Expenses paid by the solicitor on behalf of the purchaser.

Discounted Rate

A Discounted rate mortgage will have an interest rate lower than the lender's Standard Variable Rate.

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